I know this sounds confusing. That’s because it is. Here’s what could happen to you, though, if you administer this incorrectly: If you were to place one of your managers on a three-day unpaid suspension (which is less than a full week and therefore violates this rule), that could result in the manager’s exempt status being violated. In other words, the exempt manager could be considered a nonexempt employee who is entitled to overtime pay. Consequently, the Department of Labor’s Wage and Hour Division could end up sticking you with a massive ‘‘back wages’’ assessment for overtime due your manager!

There’s an easy way around the quirky wage and hour rules that govern exempt and nonexempt workers’ wages: Avoid unpaid disciplinary suspensions. First, they’re simply too hard to administer and consequently not worth the trouble. Second, they rarely turn around underperforming employees because they generate feelings of anger and distrust. Third, there’s a much better alternative.

A paid disciplinary leave, known as a ‘‘decision-making leave’’ or ‘‘day of contemplation,’’ is a once-in-a-career benefit where companies pay for an employee’s time-out period. As a result, the paid leave eliminates the embarrassment so often associated with disciplinary suspensions. In addition, when you place an employee on a one-day paid leave, you have the right to ask him to complete a homework assignment on his day off. A sample homework assignment is presented in Appendix P.

Is there ever a time for unpaid disciplinary suspensions? Possibly. When an employee engages in willful misconduct or egregious behavior that smacks of retaliation or harassment, a traditional unpaid suspension may be warranted. That’s up to you in your discretion as management. Even so, consider the one-day paid suspension as an alternative: Guilt works better than anger, even in extreme cases.

When you’re considering docking an exempt employee’s pay, contact the appropriate legal counsel to ensure that you’re administering this payroll issue within both federal and state guidelines.

Taken From : The Hiring and Firing Quention and Answer Book